Freeport reports stronger Q3 Indonesia copper, gold sales
Wednesday, October 23 2013 - 01:58 AM WIB
US mining giant Freeport McMoRan Copper and Gold Inc (FCX), which operates a large gold and copper mine in Papua through subsidiary PT Freeport Indonesia, said that copper sales from the Indonesian unit in the third quarter of this year increased by 21.54 percent to 237 million pounds from 195 million pounds in the same period of last year.
The company said in a quarterly statement obtained Wednesday that gold sales during the quarter soared by more than 56 percent to 278 thousand ounces from 178 thousand ounces in the same quarter of last year.
The stronger third quarter sales performance was primarily resulting from higher ore grades and increased mill rates.
?The ramp-up in production during third-quarter 2013 was in line with July 2013 estimates, with mill rates averaging 198,200 metric tons of ore per day. During third- quarter 2013, the Deep Ore Zone underground mine's rates averaged 47,600 metric tons of ore per day and are expected to reach 80,000 metric tons of ore per day by mid-2014,? said the statement.
As anticipated, ore grades improved from levels experienced in recent quarters and PT Freeport Indonesia expects to mine higher grade ores in 2014 through 2016 compared with average ore grades in 2012 and 2013.
Through its 90.64 percent owned and consolidated subsidiary PT Freeport Indonesia, FCX's assets include one of the world's largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. PT Freeport Indonesia operates a proportionately consolidated joint venture, which produces copper concentrates that contain significant quantities of gold and silver.
FCX has several projects in progress in the Grasberg minerals district related to the development of large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to ramp up over several years to produce approximately 240,000 metric tons of ore per day following the transition from the Grasberg open pit, currently anticipated to occur in 2017.
Development of the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) mines is advancing to enable DMLZ to commence production in 2015 and the Grasberg Block Cave mine to commence production in 2017. Over the next five years, estimated aggregate capital spending on these projects is currently expected to average $800 million per year ($630 million per year net to PT Freeport Indonesia).
Elsewhere, the statement provides the following explanations.
At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in quarterly and annual production of copper and gold. Sales from Indonesia mining are expected to approximate 0.9 billion pounds of copper and 1.0 million ounces of gold for the year 2013, compared with 0.7 billion pounds of copper and 0.9 million ounces of gold for the year 2012. Sales from Indonesia mining are expected to increase in 2014 through 2016 as PT Freeport Indonesia gains access to higher grade ore.
A significant portion of PT Freeport Indonesia's costs are fixed and unit costs vary depending on production volumes. Indonesia's unit net cash costs (including gold and silver credits) of $0.99 per pound of copper in third-quarter 2013 were lower than unit net cash costs of $1.65 per pound in third-quarter 2012 reflecting higher volumes and lower operating costs.
Unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $1.46 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming an average gold price of $1,300 per ounce for fourth-quarter 2013. Indonesia mining's projected unit net cash costs would change by approximately $0.03 per pound for each $50 per ounce change in the average price of gold for fourth-quarter 2013. Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on copper and gold volumes. Indonesia mining's unit net cash costs are expected to decline in future periods as it continues to gain access to higher grade ore.
During October 2013, PT Freeport Indonesia reached agreement with union officials on terms to be incorporated into its bi-annual Collective Labor Agreement. The terms provide for increased wages over the two-year period and enhanced pension and other benefits.
Following is summary consolidated operating data for the Indonesia mining operations for the third quarters and first nine months of 2013 and 2012:
| Indonesian Mining Operations | Three Months Ended September 30 |
|
| 2013 | 2012 | |
| Copper (million of recoverable pounds): | ||
| Production | 253 | 199 |
| Sales | 237 | 195 |
| Average realized price per pound | $ 3.30 | $ 3.72 |
| Gold (thousands of recoverable ounces): | ||
| Production | 97 | 182 |
| Sales | 278 | 178 |
| Average realized price per ounce | $ 1,330 | $ 1,728 |
| Unit net cash (credits) costs per pound of copper: | ||
| Site production and delivery, excluding adjustments | $ 2.30 | $ 2.96 |
| Gold and silver credits | (1.65 ) | (1.66) |
| Treatment charges | 0.23 | 0.22 |
| Royalties | 0.11 | 0.13 |
| Unit net cash (credits) costs (*) | $ 1.65 | $ 0.99 |
| * For a reconciliation of unit net cash costs (credits) per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VI, which is available on FCX's website, "www.fcx.com." | ||
Editing by Reiner Simanjuntak